In the tumultuous world of cryptocurrencies, a new development is drawing the attention of investors and enthusiasts alike. Terra Classic (LUNC), a coin that has risen from the ashes of the Terra Luna collapse, is implementing a burning tax of 0.5%, stirring the crypto community. The implementation of this tax burn is perceived as a pioneering move to bring stability to the cryptocurrency while stimulating its value.

The Story Behind Terra Classic

Terra Classic (LUNC) was born out of the downfall of Terra Luna in early 2022. This collapse, which marked one of the most challenging periods for cryptocurrency traders, known as “crypto winter”, generated shockwaves throughout the industry. Post-collapse, Do Kwon came up with a plan to restore the ecosystem, giving birth to Terra 2.0. The original blockchain, now known as Terra Classic (LUNC), was left without its algorithmic stablecoin, thus marking a new era for this digital asset.

The 0.5% Burning Tax

The decision to implement a 0.5% burning tax came about as a way to address the surplus of LUNC supplies that has worried the community since the market crash in May. The world’s largest crypto exchange, Binance, has announced its support for the Terra Classic network upgrade to increase the LUNC burn tax from 0.2% to 0.5% as per Proposal 11515 passed by the community. Binance CEO Changpeng “CZ” Zhao is in agreement with this move, which comes in response to the dwindling LUNC price.

The mechanism of this tax burn involves a 0.5% fee on all on-chain Terra Classic transactions, including wallet and smart contract interactions. The revenue from this tax will be used to burn LUNC tokens, effectively reducing the total supply over time. However, it’s important to note that trades on some exchanges may not be subject to this tax.

Implications and Reception

The introduction of the burning tax is expected to have significant implications for Terra Classic and the broader crypto market. By reducing the supply of LUNC, the tax aims to increase the token’s value. This idea has been met with considerable enthusiasm within the crypto community, driving a surge in LUNC’s price by as much as 200%.

While the burning tax has received favourable feedback, leading to the strong performance of LUNC, it has also triggered a short-term bearish outlook due to the token entering overbought territory. However, the increase in LUNC’s social volume suggests that more traders are paying attention to current events, potentially leading to more Terra Classic accumulation and a smaller drop in price due to the introduction of a powerful incentive for long-term HODLing.

Despite the challenges associated with making on-chain transactions more expensive, the crypto community seems to be leaning more towards accepting this deflationary price. As more investors grow open to the network, LUNC may enter a strong accumulation phase, making it an intriguing prospect for those interested in the future of cryptocurrency.

The introduction of a 0.5% burning tax by Terra Classic (LUNC) represents a novel approach to maintaining stability and increasing the value of a cryptocurrency. The success of this initiative could potentially influence future strategies in the ever-evolving landscape of digital currencies.